An Israeli demonstrator in 2008 holds a picture of Jonathan Pollard, a Jewish American who was jailed for life in 1987 on charges of spying on the U.S. / Joe Klamar, AFP/Getty Images

by Michele Chabin, Special for USA TODAY

by Michele Chabin, Special for USA TODAY

JERUSALEM - A reported U.S. offer to free spy Jonathan Pollard to breathe life into stagnant peace talks has politicians, settlers and activists on all sides in an uproar over whether the price is too high.

Israel's news media reported Tuesday that the Obama administration offered to free Jonathan Pollard, an American Jew convicted of spying for Israel, in return for an Israeli limit on settlement building and freeing of more Palestinian convicts.

But the deal may have been scuttled by the Palestinians, who applied Tuesday to join several United Nations entities despite having promised not to do so.

Palestinian President Mahmoud Abbas said he did so because Israel had failed to carry out a promised released of Palestinian prisoners. His decision came a day before U.S. Secretary of State John Kerry was to arrive in Ramallah to finalize a deal to enable the talks to continue into 2015.

Israel released hundreds of Palestinian prisoners convicted of crimes against Israelis to get the peace talks going last year. But it refused to release the final 24 prisoners, most of who were convicted of severe crimes; until Abbas agreed to his end of the bargain and extend the talks past an April 29 deadline.

Analysts say the events are creating controversy given that Pollard's release has been long sought by a right wing in Israel also opposed to the release of Palestinian prisoners and limiting home building for growing Jewish families in disputed land on the West Bank.

Jonathan Rynhold, senior researcher at the Begin-Sadat Center for Strategic Affairs at Bar Ilan University, said Pollard's incarceration resonates strongly in Israel, "where soldiers are told to never leave one of their fellow soldiers behind. There is also some shame over how Israel dealt with Pollard at the time."

Perhaps more than anything else, "Israelis feel if they're being asked to release Palestinian prisoners who have Israeli blood on their hands for the sake of moving peace process forward, the least the U.S can do is release someone who even most American believe should have been released a while back," Rynhold said.

Pollard was convicted of spying after providing Israel with thousands of classified documents, including intelligence on the Soviet military, while working as a civilian intelligence analyst for the U.S. Navy in the 1980s.

Arrested in 1985 after the Israeli Embassy in Washington refused to give him safe haven, Pollard received a life sentence. He is eligible for parole in November 2015.

Opponents to a trade for Pollard came out strong Tuesday from the YESHA Council of Jewish settlers, a powerful group politically that represents Jews living in the West Bank.

"The amount of time John Kerry has invested in attempting to secure the release of convicted terrorists and his manipulative use of Jonathan Pollard are shameful," said Dani Dayan, chief foreign envoy of the YESHA Council of Jewish settlements.

"It is about time we put an end to this never ending farce that stems from the Palestinians ever-growing demands and intransigence."

Danny Danon, a member of the Israeli legislature and part of the Cabinet of Prime MInister Benjamin Netanyahu, threatened to quit the government if the deal is taken even though he supports Pollard's release.

"It is now clear to even those who wear rose-colored glasses that the Palestinians were cynically using our goodwill to ensure the release of their terrorists while continuing with their plan to establish the state of Palestine and replace the Jewish state of Israel," he said.

Netanyahu needs the approval of his Cabinet to accept such a deal. Danon, who is a deputy secretary of Defense, said he told Netanyahu he must resign if the government "releases terrorists for the mere right to sit at the negotiating table with the Palestinians."

"I will not be able to look into the eyes of the family members who lost their loved ones in terror attacks if we continue to go down this mistaken path."

Jerusalem resident lan Farakash told Israel's IBA News that Pollard "should have been released years ago."

Unlike many of the Palestinians Israel has released from prison at the urging of President Obama, "he's not a murder," Farakash said.

The Palestinian Authority said Pollard had nothing to do with Palestinian convicts serving time in Israel, according to Voice of Palestine radio.

"We completely reject any link between Pollard and the release of our prisoners or with the extension of negotiations. As for extending these talks, we must be clear that the release of prisoners is completely unlinked to the negotiations," said Palestinian spokesperson Jami Shehada.

The proposed agreement includes an Israeli commitment to carry out a scheduled fourth release of Palestinian prisoners, including Arab citizens of Israel, and 400 other Palestinian prisoners incarcerated for crimes other than murder. Israel would also agree to freeze most construction in most West Bank settlements but not in Jerusalem, which Israel says is its undivided capital.

Palestinian negotiators now say they will only agree to extend the talks if Israel frees 1,000 prisoners.

Pollard, at first abandoned by Israel after his arrest, has over time become an iconic figure to many Israelis who believe the U.S. was withholding intelligence information vital to Israel's security and that he was acting in the best interest of Israel.

Pollard has served a longer prison term than any other person caught spying for an American ally. U.S. presidents have refused requests from Israel to release Pollard on the advice of U.S. military and intelligence officials, although Rynhold says some have recently said he has served long enough.